Adair, Occidental and SABA sign exploration agreement with Yemen

Apr 03, 2000 02:00 AM

Adair Yemen Exploration and partners Occidental Yemen Sabatain and SABA Yemen Oil Company have signed a production
sharing agreement with the Ministry of Oil and Mineral Resources to explore for oil Block 20 in the Republic of
Yemen. Adair signed the original memorandum of understanding for this block in October of 1999.
Working interests held in the project are Adair 30 %, Occidental 50 %, and SABA 20 %. The working interests as a
group are subject to a 5 % carried interest held by the Yemen Company for Investments in Oil and Minerals (YICOM) in
the concession area.
Block 20 is located in the heart of the prolific production (currently 180,000 bpd) operated by Yemen Hunt Oil
Company. Cumulative production from this area is projected to approach 1.0 bn barrels by the end of 2005. The
pipelines and export facilities already in place afford the opportunity to bring any newly discovered oil in Block 20
to market within short time frames and at minimal cost. Adair believes that the block could contain up to 340 mm
barrels of recoverable reserves.

Adair has been named the operator during the exploration phase because of their comprehensive knowledge and
experiences in the block. Occidental, with their world-wide expertise in production and development, will assume the
role of operator after discovery of commercial reserves. Mr. Richard G. Boyce, President of Adair Exploration, has
extensive experience in Yemen and was formally Exploration Manager for Yemen Hunt Oil Company.
Adair intends to implement an determined commitment by the group to utilise "state of the art" oil and gas
exploration technology. Work plans include acquisition of 3D seismic focused on the six prospects currently mapped
with existing 2D seismic data, followed by the drilling of two exploratory wells in the first exploration period and
an additional four exploration wells in the optional second exploration period. This represents a minimum financial
commitment of $ 16.3 mm during the 6 year exploration period, if the group elects to complete the second exploration
period.
"The seismic work will begin immediately upon the ratification of the Agreement by the Yemen government with initial
drilling anticipated to begin shortly thereafter", stated Mr. Richard G. Boyce, President of Adair Exploration.
"The signing of this PSA represents the culmination of over three years of extensive geological evaluation and
business development efforts in Yemen by Adair to secure this unique exploration opportunity. Adair also has other
investment projects under development in Yemen at this time", stated Mr. Jalal Alghani, Vice-Chairman of Adair
International Oil and Gas (AIGI).

Adair International Oil and Gas (AIGI) whose home office is in Houston, Texas also has interests in the United States
in natural gas fired power generation system as well as oil and gas interests in Colombia.

Occidental Yemen Sabatain is a wholly owned subsidiary of Occidental Oil and Gas Corporation which is headquartered
in Los Anglos, California, USA. Saba Oil and Gas, a private Yemeni company with principal ownership held by Sheikh
Mohammed B.Y. Al-Rowaishan.
The Al-Rowaishan Group of companies represent major commercial and trading interests in Yemen.

Block 20 Potential: Within the scope of international exploration projects, the hydrocarbon potential for Block 20
must be characterised as delivering high reward for taking low to moderate risk. Located adjacent to oil production
operated by Yemen Hunt, block 20 represents a truly unique exploration opportunity.
All elements of the prolific Alif Petroleum System are well understood and the risks associated with drilling these
prospects can be readily documented and addressed. The financial rewards of exploration in this area are
substantial.
A relatively new production infrastructure is available for the immediate export of any hydrocarbons discovered. When
combined with the improved production sharing terms being offered by the Yemen government, the return on investment
and short time to positive cash flow ranks this project better than most international exploration projects
available.
The area has undergone exploration drilling by the Total/Hunt group. Some structural targets have already been
drilled and are now developed as fields, other prospects are now recognised as a result of development drilling
during recent years. The stratigraphic elements of reservoir development have not been thoroughly explored by the
previous operators. Exploration success on this block will be determined in large part by utilising the techniques to
recognise reservoirs directly from the seismic data and implementing new drilling technology.
An aggressive exploration work program, operated by Adair International including acquisition of 300 sq km of 3D
seismic and drilling of six exploratory wells can be completed within the first two years of the program at a cost of
less than $ 40 mm.

The modern oil industry in the Republic of Yemen began with the discovery of oil by Yemen Hunt Oil Company in 1984.
The Alif #1 well, which flowed at a combined rate of 7831 bpd, sparked off intense industry interest in this
previously ignored part of the Arabian Peninsula.
Located in what was then North Yemen and now designated as Block 18-Marib, the Alif discovery eventually was
developed as a field with oil reserves of 800 mm barrels of high quality, light crude. Since the discovery of Alif
Field, Hunt and other operators have made fourteen additional commercial discoveries in this same basin in the Alif
petroleum system.
In 1987, a 440 km pipeline with a designed capacity of 240,000 bpd, was completed from the Alif Central Processing
Unit (CPU) to a floating terminal located on Ras' Isa in the Red Sea. Since that time, production from this area has
ranged as high as 180,000 bpd and is currently flowing at 160,000 bpd.
Oil production is from thick Jurassic aged sandstone reservoirs that are overlain by salt, forming an excellent top
seal to trap hydrocarbons. Typical reservoir thickness in the Alif formation is over 100 meters (300 feet) in net pay
thickness of 50 meters (150 feet) with porosities reaching 30 % and permeability of 1.0 darcies. Oil from the Alif
reservoir typically flows as sustained rates of 2,000-3,000 bpd.
Seismic data (2D) has been very effective in mapping the large faulted anticlinal folds, which form the traps for
most major accumulations. 3D seismic surveys are now being implemented and have proved very successful in the
exploration for oil in the Alif formation.

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